YOUR TICKET TO AN EU PASSPORT
Those who can afford it are looking abroad to purchase property in order to enter residency programmes that offer buyers two for the price of one: an offshore hedge and residency. Which countries offer the most appealing residency programmes and what do t
doors continue to close on South Africans aspiring to l ive abroad. And on their ability to invest in hard currency property markets, earn in hard currency markets or even – given the onerous visa requirements for South African passport holders – move around freely in these markets.
A flat-lining currency, political misdeeds and a soggy economy have left those looking to achieve these ambitions even fewer options. With hardly any buying power, offshore property investment is barely on the radar for locals these days.
But South Africans are nothing if not tenacious. And their “Plan B” is a foreign residency or citizenship-linked property investment programme, especially those that enable them freedom of movement, settlement and employment within the EU.
Many potential property investors with no links to countries outside of South Africa see these programmes as one of the few avenues open to them to provide future security and opportunity for themselves and their offspring.
Pure citizen-by-investment programmes are now the preserve of only the uber-wealthy, so property-linked residency programmes appear to be the last Hail Mary for those from the rainbow nation.
There’s a long list of countries offering residency and citizen-linked property investment programmes, many of them well beyond the affordability levels of locals. For rand-poor South Africans the most “affordable” property investment residency programmes in the eurozone are those offered by Greece and Latvia, both requiring a property investment of €250 000.
But with high taxes, no working or citizenship options and an added migrant problem, Greece is a non-starter for South Africans. Nor, it appears, are they yet comfortable with Eastern Europe. Even Spain’s residency programme, outflanked by the benefits that come with Portugal’s offering, has not piqued the interest of many locals.
Aside from near-neighbour and non-EU member Mauritius, South African interest has primarily been directed at EU property-linked residency programmes in Portugal, Malta and Cyprus – countries that ranked first,
fourth, and 16th respectively in the Global Residence Program Index (GRPI) compiled by global residence and citizenship planning leaders, Henley & Partners.
Property investment costs cited in these programmes exclude fee application costs, VAT and any other costs related to the purchase such as stamp duty, transfer duty or legal costs – all additional costs that need to be taken into account when investing offshore whether for hedging or residency purposes.
The third-largest island in the Mediterranean and ex-British colony is fast becoming the residence of choice for an increasing number of South Africans.
For South African expats, Paphos is the preferred area and it is here that Gary Player is currently building his signature golf course.
Paphos, says Jenny Ellinas, founder and managing director of Cypriot Realty, is much like the Western Cape. “It is the agricultural lung of the island where most of the produce is grown, where most of the golf estates are located and where more than 53% of Cyprus’s 2.6m annual tourists come on holiday.”
Ellinas believes the strong uptake from South Africans for Cyprus’ residency programme has much to do with the programme extending to the entire immediate family – main applicant, spouse, all dependent children up to 25 years of age and both sets of parents. That comes at an additional cost of €365 000, qualifying eight members.
Further benefitting Cyprus’s residency programme is that no capital gains tax applies to property purchased by 31 December 2016 and property transfer duty up to this period has been halved.
“Over the last nine months more than 50 South African couples have taken up this opportunity. And the list is growing, with many investors planning a property inspection trip in the next few months,” adds Ellinas.
At 12.5% Cyprus boasts the lowest corporate tax rate in Europe and as a result, a number of South Africans have set up businesses there. They are investing there too; JSE-listed Attacq Group recently acquiring a 48.75% stake valued at €195m in two leading shopping centres in Cyprus’s capital, Nicosia.
Foreign investment may be pouring into Cyprus, €1.8bn of that in the last 18 months due to the permanent residency and citizenship programmes on offer, but the island has not been without its share of problems.
Historically, Cyprus has battled tensions between the Greek-held south and the Turkish-held north. And in the spring of 2013, the country was mired in bad press after the government of Cyprus seized vast sums of foreign investors money (much of it Russian) to aid in its banking bailout. Potential investors have not forgotten this, nor should they.
Located in the Mediterranean just south of the Italian island of Sicily, the charming island of Malta is experiencing unprecedented investment growth, strongly driven by its attractive citizenship-byinvestment and residency programmes, as well as increased investments by leading industries taking advantage of Malta’s financial and economic stability.
The island’s financial services industry has grown rapidly in past years, contributing 12% to GDP in 2015. And Malta boasts one of the best unemployment rates in Europe, only the Czech Republic and Germany posting better figures.
“Malta’s property market is hot,” says Merle Whale of Malta Lifestyle, “and South Africans are keen to invest for a number of reasons: a hedge in euros, attractive buy-to-let earnings with favourable taxation and one of the best residency options in Europe offering a Schengen visa. There has been a scramble to buy property, not only by South African buyers. A 46-apartment development released a couple of weeks ago sold within a week.”
Malta currently offers two property-linked residence programmes for non-EU nationals.
According to Dr Pierre Mifsud, advocate and partner at Maltese legal and tax advisory firm EMD, under the Global Residence Program (GRP) the minimum purchase price is €220 000 if purchasing in the south of Malta or Gozo, or €275 000 elsewhere in Malta. In this programme, a 15% flat tax rate is charged on foreign-source income received in Malta, with a minimum liability of €15 000. In addition, any income arising in Malta would be taxable at 35%.
Under the GRP individuals may not spend more than 183 days in a calendar year in any other jurisdiction. And the property purchased or rented must be the applicant’s primary residence and cannot be let or sublet.
Unlike the GRP, the Malta Residence & Visa Programme (MRVP) (see box) is a pure immigration programme with no annual income tax payable unless you live in Malta, says Mifsud. Nor are there any stay requirements under this programme. But under the MRVP the property and government investment must be kept for at least five years, expands Mifsud.
“Many South Africans invest around the popular seafront towns of St Julians and Sliema while historical waterfront towns like Vittoriosa and Senglea are also extremely popular,” says Grahame Salt, director of Maltese real estate company HOQ.
South Africans have even opened small businesses like boutique hotels and B&Bs, and brands familiar to South Africans are also making their way to Malta – Ocean Basket opened on the island last year.
For South Africans, Portugal’s Golden Visa residence by property investment programme is a compelling option because of the residency and citizenship benefits built into the programme.
According to Chris Immelman, MD of Pam Golding Properties International & Projects division (PGP), around 200 South African families have already bought into the programme, 140 of them through PGP. Ninety percent of South Africans that are purchasing property in Portugal are doing so for the residency programme, says Immelman.
The programme’s qualifying price of €500 000 is likely to bag investors a quality two-bedroom apartment in Lisbon or the popular coastal town of Cascais, just 30km outside of Lisbon. One requirement of the programme is that the property is held for five years.
Portugal has recently also introduced a more affordable residency-linked programme, its Golden Residence Programme, for old properties applying to the purchase of properties older than 30 years or in urban renewal areas. Qualifying property investment through this programme is €350 000.
“But,” says Immelman, “these are properties you have to renovate yourself and they are in areas that we do not believe have value. We have yet to find a development that is worth presenting to South Africans.”
Portugal’s Golden Residence programme has emerged as the world’s best residence-byinvestment programme according to Henley & Partners, global leader in residence and citizenship planning. The programme, introduced in 2012, has earned the country €1.25bn.
But the country’s Golden Visa programme has been hard-hit by application processing delays. That, according to Francisco Barata Salgueiro, senior partner at Neville de Rougemont Attorneys in Lisbon, has been addressed with processing now taking around two to three months.
This €299 000 recently renovated one-bedroom, two-bathroom maisonette with study and terrace in the heart of Senglea in Malta enjoys spectacular Valletta habour and Fort St Angelo views.
Jenny Ellinas Founder and managing director of Cypriot Realty
Dr Pierre Mifsud Advocate and partner at EMD